Bank stocks gain up to 7.7% on RBI's NPA resolution move

Banking sector is saddled with NPAs of over Rs 8 lakh crore, of which Rs 6 lakh crore is with PSBs

Bank stocks were in focus on Wednesday, rising by up to 7.7 per cent, after the RBI identified 12 bad loan accounts for insolvency proceedings.

Shares of Allahabad Bank surged 7.68 per cent, followed by Andhra Bank 4.38 per cent, Syndicate Bank 4 per cent, Union Bank of India 2.35 per cent and PNB 2.15 per cent on BSE.

Other gainers were: Canara Bank 2.01 per cent, Bank of Baroda 1.91 per cent, Bank of India 1.53 per cent, ICICI Bank 1.38 per cent, Federal Bank 1.09 per cent and SBI 0.19 per cent.

The BSE bank index went up by 0.10 per cent to close at 26,570.61.

"PSU banks exhibited a sharp surge taking cues from NPA resolution policies being formulated by RBI," said Anand James, Chief Market Strategist, Geojit Financial Services Ltd.

The central bank yesterday identified 12 accounts for insolvency proceedings with each of them having over Rs 5,000 crore of outstanding loans, accounting for 25 per cent of total NPAs of banks.

The banking sector is saddled with non-performing assets (NPAs) of over Rs 8 lakh crore, of which Rs 6 lakh crore is with public sector banks (PSBs).

These 12 accounts would qualify for immediate reference under the Insolvency and Bankruptcy Code (IBC), the RBI said.

"It is a positive step towards solving the problem of NPAs in the country. The new insolvency rules are coming handy to expedite whole process of resolving NPAs," said Nikhil Khandelwal, MD, Systematix.